TRADING WITH THE RUSSIANS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83T00966R000100070009-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 19, 2016
• Document Release Date: February 20, 2007
• Sequence Number: 9
• Publication Date: June 1, 1982
• Content Type: OPEN SOURCE

Approved For Release 2007/02120 :CIA-RDP83T00966R00010007000~-
A political strateg~~ for economic relations.
TRADING WITH THE RUSSIANS
BY HENRY A. KISSINGER
N THE WAKE of the Soviet invasion of Afghanistan
and then of the suppression of liberty in Poland,
two successive American Administrations vainly
sought European support to restrict East-West trade.
The resulting disagreements have left an unfortunate
residue. In America, many believe that Europe subor-
dinates long-term strategy and even security to short-
term domestic politics; in Europe, many argue that
America seeks to play for geopolitical stakes with
European chips, risking the domestic cohesion of
friendly countries without ourselves making equi~~a-
lent sacrifices, as the lifting of the grain embargo
suggests.
Pressures for East-West trade grew in the late 1960s
and early 1970s-ironically, following the Soviet inva-
sion of Czechoslovakia. It was argued in some quarters
that despite occasional Soviet transgressions, increased
trade would moderate Soviet behavior by making the
U.S.S.R. increasingly dependent on the technology
and grain of the industrial democracies. The American
Administration then in office, in which I served, held
from the first that trade should ~ollotu prior demonstra-
tions of Soviet commitment to a more peaceful course
and should be linked to Soviet international behavior.
41'hen the Soviet Union entered into serious negotia-
tions on Berlin, SALT, mutual force reductions, and
other matters, the United States gradually lifted re-
strictions, on a case-by-case basis and tied to specific
projects. Our European allies followed, and far sur-
passed us in both the scale of their trade and credit and
the ease with which they made it available.
Whatever the merit of the original theories, it is now
clear that trade and credits can moderate Soviet con-
duct only if the Kremlin fears that intransigence will
cost it the economic benefits it seeks. Yet that is what is
most insistently rejected by the domestic interest
groups in all countries that gain from East-West trade
and by the Western governments that they influence.
More and more, the governments of the industrial
democracies art on the premise that the immediate
gains in employment outweigh the political risks of
strengthening a hostile and aggressive political s}~s-
Henry A. Kissinger's latest book is Yenrs of Uplrea; a!
(Little, Brown).
/1J:
tem. This is all the more shortsighted, since a mount-
ing tide of radicalism and insecurity in the world-
inevitably encouraged or abetted by a growth of Soviet
power unrestrained by some agreed code of conduct-
willsooner orlater compound all economic difficulties
as well.
There is little doubt that the negotiating balance in
East-West trade has been reversed over the past dec-
ade. In every crisis, the West invents new excuses for
declining to interrupt economic relations. Indeed, eco-
nomic relations have done much more to induce ~Nest-
ern restraint in the face of Soviet misconduct than to
encourage Soviet restraint in international behavior. .
The inequality in bargaining positions is almost
entirely the result of the disunity of the democracies.
The West is divided into competing units that are
sometimes prevented by antitrust legislation from act-
ing together, and often encouraged by governments
that seek special benefits for their national industries
by concessional credits. Loans have been offered or
encouraged with little or no consideration of Soviet or
East European ability to use or repay the funds. Default
is avoided by "rescheduling; ' that is, lending more
money to pay interest on what are in effect bad loans-
protecting the lenders' balance sheet. In these circum-
stances it is easy for the Kremlin to play Western
countries, and even industries, against each other,
obtaining benefits not justified by the economic bal-
ance of advantage, much less .by political circum-
stances.
The result has been an anomaly. By any objective
analysis, the Soviet Union and its satellites are infi-
nitely more dependent on East-West trade than their
trading partners, the industrial democracies. The So-
vietUnion cannot feed itself without the non-Commu-
nist world's grain; it desperately needs Western tech-
nology. The inequality in benefits would long since
have reduced trade to a trickle had not Western gov-
ernments stepped in with direct or hidden credits,
which now amount to nearly $90 billion for the Com-
munist world. In addition, many export pricey are
subsidized by governments directly or indirectly. The
Communist countries thus are not only gaining a
relative advantage in trade, but are also bring financed
by the nations against whom they are sirnultaneously
Approved For Release 2007/02120 :CIA-RDP83T00966R000100070009-5
 Approved For Rel_se 2007/02120 :CIA-RDP83T00966R~00100070009-5
conducting a geopolitical offensive. Din's legendary
dictum that capitalists would compete to sell the rope
with which they would be hanged is coming true with
a vengeance-for Lenin never guessed that Western
governments would provide the money to buy the
rope and subsidize the price to facilitate the purchase.
It is unthinkable that the West should continue to
use its overwhelming share of the world's economic
power so frivolously. We are on the defensive not
because we lack resources but because we have failed
to muster the will or the leadership to organize a
coherent response. We have tried stop-and-go sanc-
tions,. They have failed because they affected various
countries and different sectors of the economy un-
equally. They have turned into pinpricks dramatizing
the ~vVest's weakness rather than its mastery of the
situation.
The issue has further been clouded by the extreme
man~zer in which the choices have been stated. Some
opponents of East-West trade seem to hope that a total
deni;it of economic benefits would force the collapse of
the Soviet system. This theory is disproved by history.
The Soviet system survived several decades of eco=
nomic isolation and did not crumble. And it runs
counter to the domestic pressures for seeking negotia-
tions on a broad front. The last eighteen months show
that the alliance will not sustain a policy of confronta-
tion for its own sake, unrelieved by any hope of
diplomatic progress.
Butt the opposite theory, of the automatic mellowing
effect of trade, has also been demonstrated to be falla-
cious. Soviet behavior in recent years has given the lie
to the argumenk that. trade and credits by themselves
will bring about a benign evolution of the Soviet
system. Soviet-Cuban intervention in.Angola, in Ethi-
opia, and in South Yemen; the invasion of Afghani-
stan; the suppression of Solidarity in Poland; and the
use of toxic chemical and biological warfare in Af-
ghaniistan and Southeast Asia have all occurred in
preci:~ely the period of expanded East-West economic
cooperation.
F "I'HE DEMOCRACIES continue to make available
their hard-earned resources for an assault on the
geopolitical balance, they must not be surprised at the
inevii:able decline in their security and prosperity. So
long pis the Soviet Union asks us for help in solving its
economic problems by what amounts to Western aid,
the industrial democracies have the right, and indeed
the ditty, to insist on restraint and stability in interna-
tional conduct in return.
They industrial democracies are in a position to use
their economic strength positively and creatively.
There exists a sensible rationale for East-West trade
which is neither unrestricted economic warfare nor
uncontrolled Soviet access to Western trade, credit,
and technology. If the democracies cannot concert
unified political criteria, they should at least be able to
agree on letting market~conditions determine the level
of East-West trade and credit. If government-guaran-
teed credits and subsidies were to end, East-~-Vest trade
would be reduced to the level of reciprocal economic
benefit-or a small fraction of what now exists. If the
Soviets want to go beyond this-if they seek further
credits or subsidized prices-the West should insist on
a pulrtirnl quid pro quo.
O TNIS END, the industrial democracies should
jointly take the position that they are prepared
over the long term to engage in economic cooperation
even on an augmented scale-but only if there is in
return a comprehensive political understanding pro-
viding for settlement of the most serious outstanding
problems, specific restraint in superpower conduct,
and major steps toward arms reduction. The conditions
should not be pious platitudes and should be.spelled
out in concrete detail. Nor should we delude our-
selves: this cannot be achieved without a period, per-
haps of some years, of disciplined coordination and
restraint among the democracies to convince the Sovi-
ets that we are serious.
Specifically, the democracies should start by specify-
ing their objectives in the political area to provide
clear-cut criteria for progress. The most important
message would be that the industrial democracies pro-
pose to speak with the East with one voice.
Second, there should be an urgent updating of the
list of prohibited strategic exports and a determination
to stick to it.
Third, the democracies should examine at the high-
est level on what political terms the Soviet Union and
the nations in its system will enjoy governmentally
supported access to Western trade and financial re-
sources. Policies on export credits and financial guar-
antees should be reviewed periodically, based on a
commitment to establish a common and noncompeti-
tivepolicy among all members of the Organization for
Economic Cooperation and Development.
Fourth, the democracies should agree to end pro-
gressivelyall government subsidies and guarantees for
private bank credits to Eastern Europe. Given the
nearly catastrophic performance of Communist econo-
mies, the marketplace would determine the proper
flow of private credit, probably to restrict if not elimi-
nate it. The same principle should apply to subsidized
prices. Concurrently, there should be an agreement
that rescheduling of existing debts will be heavily
influenced by behavior of the countries concerned,
especially in the Field of foreign policy but including
an end of martial taw in Poland.
Fifth, there should be an urgent review of the grain
export policy of the major grain-producing nations to
determine how it can serve the strategy sketched here
without undue hardship to the farmers in all our
countries.
Finally, there must be a consensus among the de-
Approved For Release 2007/02120 :CIA-RDP83T00966R000100070009-5
 Approved For Release 2007/02120 :CIA-RDP83T00966R000100070009-5
mocracies about what form of expanded economic
cooperation we are prepared to undertake with the
Communist world if this strategy of Western economic
coordination leads to a broad East-West political un-
derstanding. The Versailles summit would seem to
provide a useful forum to begin such a process.
What these measures suggest is in the long-term
interest of boti~ East and West. It discourages Soviet
adventurism grounded in the belief that the West is
too weak, too selfish, or too divided to defend its
interests with its best weapons. It thus forces the
Soviets to make real choices at a time when their
succession struggle will inevitably involve an internal
debate over priorities and a possible desire to ease
outside pressures. If it leads to the sort of political
settlement that precludes later reversal, trade and
credit can safely be expanded. If such a settlement is
unattainable, continuing our present trade and credit
practices will in effect accelerate our crisis. In that case,
future generations will not be able to explain what
possessed their predecessors to engineer their own
decline by lassitude, greed, or lack of leadership.
If the industrial democracies wish to subsidize their
exports by easy credit or pricing policies, the creative
area for such efforts is not in the Communist countries
but in the third world-especially among its moderate,
market-oriented governments.
The Soviet Union is a system with no legitimate
method of succession, a stagnant economy, a demogra-
phic challenge in the growth of its non-Russian popu-
lation, and ideological claims whose bankruptcy is
being proven by the working class of Poland in the
streets of Polish cities. The joke of recent history is that
the only spontaneous revolutions in industrialized
countries have been against Communist governments.
A system that feels so threatened by even the most
elementary liberties, a system so structurally unsound
and so patently contrary to the human spirit, can
prevail only by our inadequacies, not by its own
efforts. The West, which over centuries has shaped a
great civilization-of culture, philosophy, inventive-
ness, and well-being-must not now abdicate control
of its own destiny to short-term calculations. Democ-
racy requires above all clarity of thought, fortitude,
and leaders willing to present the facts to their people
and prepared to deal with complexity.
For the Social Democrats, winning isn't everything,
IS SCHMIDT'S PARTY OVER?
BY JOSEF JOFFE
Hamburg
~HE SOCIAL DEMOCRATS are Germany's oldest
party. They survived Bismarck, the Kaiser, and
Hitler. During the war, the party withstood violence
and exile. Resurrected amid the ruins, the Social
Democratic Party found itself condemned to seventeen
years on the opposition benches. In the end it tri-
umphed, wresting the Bonn government from its con-
servative rival.
But that was thirteen years ago. Today the sPD is in
danger. The threat it faces stems not from the defama-
tion and persecution of decades past but, paradox-
ically, from the very possession of power. The SPA has
ruled West Germany (in tandem with the liberal Free
Democrats) for half a generation, and Helmut
Schmidt's tenure has now overlapped with that of four
American Presidents, three presidents of France, and
Josef Joffe is a senior editor of the West German
weekly Die Zeit.
three British prime ministers. The Chancellor has
managed to ride out two oil shocks and the worst
worldwide recession since the Great Crash. Yet if there
were an election next Sunday, the sPD would get only
one-third of the total vote, while the Conservatives
(the cou/CSU) would walk away with alandslide-and
over 50 percent of the ballots cast.
The paper defeat in the opinion polls is mirrored in
the real disaster of recent Land (state) elections. Last
year the SPA lost Berlin, its most solid electoral
stronghold for generations. (Even at the height of Nazi
power, Hitler never felt comfortable in "red" Berlin.)._
In the Ladd elections in Lower Saxony, the sro was
overwhelmed by the Conservatives, 37 to 51 percent.
In the regional votes to come, Hamburg in June and
Hesse in September, the Social Democrats will be
lucky if they lose only one of the two states. If they are
defeated in the national contest of 1984, the Social
Democrats will have nowhere to go to lick their
Approved For Release 2007102/20 :CIA-RDP83T009f36R000100070009-5